The long-awaited [or rather dreaded] Proposed Financial Crime Enforcement Networks [FinCEN’s] rule finally here. And hardly anyone in the community is happy with it.
The proposal in question aims to extend AML regulations to non-custody wallets. This ended months of speculation as to what the rule would mean which has caused serious turmoil among community members. As expected some prominent crypto personalities are now set to challenge it.
One such is the Co-Founder and CEO of cryptocurrency exchange, Coinbase, Brian Armstrong revealed this feeling hours after the FinCEN release suffocating wallet regulations for transactions involving cryptocurrency wallets. He went on to claim that the rule does not follow the correct process.
I was going to tweet about the proposed rules from FinCEN and the Treasury. But @jchervinsky summed it up really well.
It does not follow the correct process, and we will challenge it. https://t.co/8lQaDMcz1V
– Brian Armstrong (@brian_armstrong) December 19, 2020
FinCEN Rule: Quick primer
Under the new rule, central exchange users, who are trying to move their coins to their own private wallet, or to someone else’s, would have to provide detailed personal information for larger transactions the $ 3,000. On the other hand, the central exchanges would have to disclose any withdrawals and deposits of more than $ 10,000 to the financial crime watchdog in the form of a full currency transaction report.
In short, the community was left devastated as FinCEN’s rule undermined the exact ethos of space and the underlying technology as well as the early promise of privacy and self-sovereignty.
Consolidated General Counsel, Jake Chervinsky called FinCEN rule as “terrible” and went on to explain how the rule would impose new obligations on virtual asset service providers [VASPs]. While recognizing that FinCEN does not offer a complete ban on self-custody, however, it does little to achieve its main goals.
He claimed that if the big problem were illegal activity, the latest rules would not stop the flow of money to bad actors or help law enforcement do its job. Furthermore, it also does not provide any new information to state investigators as VASPs already KYC their customers as well as keep transaction records. Chervinsky also said,
“Secondly, it infringes on the financial privacy rights of US citizens. Today, law enforcement has to subpoena VASPs to obtain customer information. These can, and often should, be challenged by VASP. This rule would force VASPs to automatically transfer that information, each time. “
The lawyer also highlighted the recent leaks and hacks of FinCEN Files, saying the government has not yet taken appropriate steps to store public information effectively or securely.
“Now is not the time to expand mass surveillance operations and gather unwarranted government data.”
Calling FinCEN’s proposal “vague and ambiguous” Chervinsky questioned how the VASPs will be able to collect references such as the name and physical address of a non-custodial wallet owner and the price of “owning” a private key. He also revealed his plans to help the Blockchain Association evaluate grounds to challenge the rule under the APA.